Labor Senators note their concern that regional NBN investment was reduced by $200 million in the 2020 NBN Corporate Plan over the period from
2018–2022, despite the Government's broadband tax being proposed in the name of regional funding.
Labor Senators note their disappointment that NBN Co sought to conceal this regional funding reduction, with the company subsequently offering contradictory explanations about what had occurred and why it occurred.
Labor Senators note the following comment by the Minister for Communications, the Hon Paul Fletcher MP:
We are going to need to rely on and boost competition to make sure that our fixed networks continue to upgrade and stay in tune with world developments.
Labor Senators note the Minister's statement is directly contradicted by the broadband tax policy the Government seeks to legislate.
Labor Senators note the industry consensus that the Government's proposed broadband tax reduces incentives for the private sector to invest and has an anti-competitive intent. This is clear from the views expressed by industry participants in evidence to this inquiry, including:
Vodafone:
Not only will the RBS [regional broadband scheme] perpetuate the trend of opaque and anticompetitive telecommunications policy, it will chill investment in both fixed and mobile telecommunications infrastructure.
Telstra:
Senator Urquhart: Will the proposed levy increase or decrease the incentives that private sector carriers have to invest in their own fibre infrastructure?
[Telstra representative]: I think logically it would decrease those incentives…
OptiComm:
Senator Urquhart: Will the broadband levy increase or decrease the incentives that you have to invest?…
[OptiComm representative]: It would decrease.
Vocus:
The likely effect of limiting the RBS charge base exclusively to fixed-line high-speed broadband services will be to further incentivise private-sector investment in mobile and fixed-wireless services (which will increasingly be capable of undercutting NBN prices, as they will not be subject to the RBS levy), and to further disincentivise investment in fixed-line services.
TPG:
TPG considered that infrastructure-based competition to the NBN ought not to be hindered by a tax that simply targeted fixed line carriers.
Internet Australia:
In many respects the new RBS is anti-competitive in structure and scope, and designed more to prop-up the NBN funding regime than to enable open and transparent infrastructure competition to improve and advance broadband service availability in regional and remote areas.
Labor Senators note the following passage in the Explanatory Memorandum to the Telecommunications Legislation Amendment (Competition and Consumer) Bill 2019:
The monies collected from the [RBS levy] will be used to fund NBN Co's net costs for constructing and operating fixed wireless and satellite network infrastructure, replacing the company's opaque internal cross subsidy.
Despite this passage there is seemingly no mechanism that requires the surplus revenue from the Government's $800 million annual broadband tax to be spent on regional networks.
In practice, there remain legitimate concerns that once the tax revenues flow into NBN Co the company management can effectively direct surplus tax revenue towards anything they wish once it is washed through an offset account, regardless of whether the expenditure relates to a regional outcome or not.
Labor Senators note the modelling that underpins the Regional Broadband Scheme is nearly five years old, and is based on data that is inaccurate.
Labor Senators note their disappointment that the Government has refused to update the modelling, despite previous urgings by the Senate and agreed recommendations 19 and 20 of the NBN Joint Standing Committee into the rollout of the NBN in rural and regional areas.
Labor Senators note their support for a price signal to deter opportunistic cherry picking of the residential NBN fixed-line network. This is important for the economics of the NBN given the significant public investment which has been made.
Labor Senators note their support for the Telecommunications Legislation Amendment (Competition and Consumer) Bill 2019 and the Statutory Infrastructure Provider regime.
Labor Senators are of the view that it is not desirable for the Government's enterprise tax to be absorbed by the telecommunications industry.
Labor Senators are of the view that it would be desirable for the Government's broadband tax to be absorbed by enterprise customers themselves, given their capacity to pay and the benefits accruing to them from increased competition in the enterprise market.
Labor Senators note evidence from NBN Co that it does not price the tax into its enterprise products, and note concerns this could create a market dynamic where the industry as a whole is forced to absorb some or all of the enterprise levy on their bottom line.
Recommendation
Labor Senators recommend that the Bill be amended to require the Australian Competition and Consumer Commission to publish updated modelling of the Regional Broadband Levy using the framework adopted by the Bureau of Communications Research in 2015. The timeframe for publication should also be no longer than 60 days from when the legislation receives assent.
The updated modelling should also include an estimate of what proportion of the broadband levy charge is tied to sunk and historical losses in the fixed wireless and satellite networks as of 1 July 2020.
Recommendation
Labor Senators recommend that the Australian Communications and Media Authority exercise forbearance towards carriers who are unable to implement the broadband tax in their systems by the required date, and if necessary, the Government consider delaying the commencement date of the levy.
Recommendation
Labor Senators recommend that the Government begin work on developing a roadmap for how the Universal Service Obligation and Regional Broadband Scheme can be consolidated and harmonised over time.
Senator Nita Green
Member
Senator Marielle Smith
Member
Senator Anne Urquhart
Participating Member